What is going on with our current real estate prices? Is there any end in sight to the bullish trend in the GTA housing market? It’s easy to get frustrated, but staying focused and keeping your emotions in check, will help you make better, clearer decisions in today’s market.
What is Value?
Every home has two prices – the one it lists for and the one it sells for. Value for any commodity in any market, is defined by the price a willing buyer and seller agree to, given reasonable time on the market and neither party under duress. The two critical components – time and no duress – are both contributing to the price rise we are seeing right now.
Buyers have almost no time to make a decision. Here today, gone tomorrow is the new real estate magic trick. In most cases, a home buyer must decide on the spot and this lack of time, no doubt, causes considerable duress. It also creates a psychological shift from “I want this home” to “I need this home.”
A willing buyer now becomes a pressured buyer, and the frenzy just to get a home causes the selling price to be pushed higher… considerably higher.
What Can I Do as a Home Buyer?
In order to step into this market right now, here are a few helpful tips:
- Get a Mortgage Pre-Approval. Know exactly what you can afford, determine the monthly maximum you wish to spend on a mortgage, and reasonably stay within your limit. The new government stress test on mortgage approvals goes a long way toward ensuring a home buyer remains within their financial means. As well, a mortgage pre-approval makes you a cash buyer. Sellers love cash buyers!
- If you can, get in sooner than later.* Understand that in a rapidly rising market, it may be in your long-term best interest to accept paying a higher price today to avoid paying even more in two or three months.
I have seen a home buyer hesitate and within a few months, be priced out of the market for their ideal home. As a result, a compromise on the type of home and location was made. When making such a large investment, you shouldn’t be forced to compromise on things that are important to you and your family.
Another client last year paid about $40,000 more than they wanted to at the time of their home purchase. However, from the date they had an accepted agreement to the day they actually took possession, house prices had risen about 10%. The result – their house was worth $75,000 more. So, did they over pay by$40,000 or were they now up $35,000?
*Please note, I am not advocating over-paying for your new house. It’s merely an observation that the long term goal must be factored into a buying decision. Losing sight of the forest by focusing on the tree often causes us to miss out on all the variables taking place.
- Find the right balance of what you are willing to pay for your ideal home; where you will compromise if needed; and be prepared to walk away. Our team has a very straight forward approach to price and bidding wars. We believe it is about finding the delicate balance between avoiding buyer’s remorse after the purchase and avoiding regret about not going in stronger on an offer (and losing the home). Ours is a heart to heart discussion designed to help you make the very best decision, without clouded judgement.
- Data is your friend. Historically, one can reasonably predict, using a mathematical formula, where a house price could land based on the number of competing offers. With our clients, we future pace the price and can make an informed decision. Obviously, it is not an exact science, however, historical data supports our formula and helps us ensure we are not artificially inflating a price if we have no intention of winning in a bidding war. Why be fodder for pushing prices even higher?
Helping You Make the Best Decision
Our team focuses on a consultative process to fully understand your goals and what about those goals is important for you and your family. Give us a call and let’s chat over a coffee on how best we can help you. We serve at the privilege of our clients.